Investors in AstraZeneca have had a distinctly mixed reaction to the news, which may put more pressure on the board of the Anglo-Swedish company to deliver better returns. The U.S.predator has said that the £55 per share bid is "final" and that it would not go hostile.
Aberdeen Asset Management, which holds a 2.5 percent share, said that Pfizer "could do better" on price.
Meanwhile, Jupiter Fund Management, a top 30 shareholder in AstraZeneca, said they were "disappointed" by the U.K.-listed pharmaceutical company's management's refusal to engage with Pfizer.
After a months-long courtship of the smaller U.K. company, Pfizer came back with a £53.50 per share bid on Friday, before raising it again to £55 per share late Sunday night.
However, the AstraZeneca board has said it would need an offer of closer to £59 per share to come to the table with the U.S. giant.
Shares in AstraZeneca dropped by 13 percent in early Monday morning trading following the announcement that it had rejected Pfizer's revised offer.
The latest Pfizer bid is around 45 percent cash to 55 percent shares in the merged company - a substantial hike in the 33 percent cash offered earlier in the month. Pfizer needs to keep AstraZeneca worth around 20 percent of the combined company to get the "tax inversion" which was one of the key drivers behind the deal.
The most recent offer would give AstraZeneca shareholders 26 percent of the merged company, indicating that there is a small window for a higher cash component.
There is still a small chance the deal could go ahead, if AstraZeneca management decided to change their stance and engage with Pfizer. This would take a substantial shareholder rebellion in the week remaining before May 26, the deadline for Pfizer to make a "full and final offer" under U.K. takeover law (as opposed to the "final proposal" which has been made.
Ian Read, chief executive of Pfizer, expressed his frustration with AstraZeneca's management.
He said in a statement: "We have tried repeatedly to engage in a constructive process with AstraZeneca to explore a combination of our two companies.Following a conversation with AstraZeneca earlier today, we do not believe that the AstraZeneca board is currently prepared to recommend a deal at a reasonable price."
The deal has already caused political turmoil in the U.K., with politicians lining up to criticize Pfizer's previous record in takeovers. Pfizer has pledged to keep at least 20 percent of the merged company's research and development in the U.K.for five years in the event of a successful bid, in a move described by Read as "unprecedented."
"Being an open economy does not necessarily mean saying yes to every merger," Chuka Umunna, shadow Business Secretary for the U.K.'s opposition Labour Party, told CNBC.
"In certain cases, there is a public interest in what is happening. Our pharmaceuticals sector is a world-beater and therefore there is a national interest in these issues."